2024-03-25 12:14:01 ET
Summary
- Shipping disruptions caused by the Red Sea Crisis and EU sanctions against Russia have increased ton-mile demand. In addition, oil supply growth is driven by non-OPEC+ producers.
- The low orderbook caused by few contracting activity in recent years has resulted in few ships delivered to the market.
- While we saw an uptick in the orderbook, the market's fleet average age is at a two-decade high. Ageing fleet ideal for scrapping will partly help offset future fleet growth.
- Shares are trading at 0.8x NAV and 5x forward EV/EBITDA, lower than 5-year average. Current market environments will likely lead INSW to generate robust free cash flow.
- The potential resolution of the Red Sea crisis and EU sanctions will likely reduce ton-mile demand. In addition, the orderbook is picking up, meaning that there will be more supply to the market.
Investment Thesis
We anticipate that ongoing geopolitical tensions and constrained vessel supply coming to the market will retain charter rates at elevated levels. While there has been an uptick in the orderbook, near-term net fleet growth is likely to remain below the average of the past decade especially driven by ageing fleets. Shares are trading at 0.8x NAV and 5x forward EV/EBITDA. However, there is a potential slowdown in ton-mile demand growth, upon the resolution of shipping disruptions. Further, attractive market returns should stimulate contracting activity, thereby driving future fleet growth. However, aging fleets present potential scrapping opportunities, which could partly help mitigate supply growth. Initiate with a BUY rating.
Introduction
International Seaways, Inc ( INSW ) is one of the largest US-listed tanker companies by deadweight tonnage ("DWT"). The company specializes in transporting crude oil ("dirty oil") and refined petroleum products ("clean oil"), such as gasoline, diesel, jet fuel, asphalt, and naphtha....
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For further details see:
International Seaways: Robust Market Fundamentals, Reasonable Valuations